U4 Topic 10 Flashcards
Q2
Ellie will usually require details of previous employment if a mortgage applicant has been with their current employer for less than :
-Two years
-Three years
-Five years
-Three years
If a mortgage applicant has been with their current employer for less than three years, a lender will usually require details of previous employment
Q3
Which of the following types of income is less likely to be included by a lender when assessing mortgage affordability?
-Secure trust
-Informal child maintenance
-Company pension
-informal child maintenance
Child maintenance payments will need to be subject to a court order and payable for a specified time. Secure trust income and pensions are acceptable sources of income.
Q4
A self-employed persons income for mortgage purposes is normally calculated as turnover minus:
-Routine business expenses
-The cost of necessary raw materials
-The cost of raw materials and routine business expenses
-The cost of raw materials and routine business expenses
Net profit is the figure used by lenders and is calculated as gross profit (turnover minus materials) less routine expenses
Q5
Certain businesses can submit a short term tax return rather than providing detailed accounts. The maximum earnings for a business wishing to do so is:
-Net profit below the threshold for making about VAT return
-Gross profit below the threshold for making a VAT return
-Turnover below the threshold for making a VAT return
-turnover below the threshold for making a VAT return
A short self assessment tax return is available to businesses return over below the threshold for having to make a VAT return
Q6
Which of the following statements apply to a directors loan account? Select all that apply
-It records loans from the company to participator
-It records loan from a participator to the company
-It can provide loans to the spouse of a shareholder
-All options are correct
The term participator is defined as a person with the share interest in my company or the family of participator
Q7
Which of the following factors would prevent a lender from waving or modifying an affordability assessment if a borrower will wish to vary the terms of, all replace an existing mortgage?
Select all that apply
-The mortgage is on a fixed rate
-The mortgage amount will increase to cover an arrangement fee
-The borrow missed three mortgage payments at the start of the current year
-The variation would be from a variable rate to a cap rate
-The borrower wishes to increase the mortgage to build an extension
-deborah is currently with the lender that does not offer new mortgages
-The borrower missed free mortgage payments
-The borrower wishes to increase the mortgage for an extension
Q8
A couple have applied for a mortgage. The lender has established the following during their affordability assessment:
-Net income to 2200
-Personal loan payments £200 a month for the next four years
-Day-to-day basic needs £600
-Council tax and utilities £350
-Life car and home insurance £75
-Spending on clothes and personal items to £200
-Savings £200
The carpool’s monthly free disposable income would be assessed as?
-975
-775
-575
- 775
Deduct committed and basic essential expenditure, also deduct basic quality of life expenditure, e.g. clothes/personal items.
Q9
Which of the following applies when a lender carries out an interest rate stress test for a mortgage applicant?
-The test must be carried out mortgages of all types and lengths
-The minimum interest rate increase applies 1%
-The lender must use his own statistics to determine which interest rate rates use
-The minimum interest rate increase to apply is 1%
Q10
A credit impaired customer is looking for a further advance, claiming it is to consolidate credit card into his mortgage.
Using the lender standard criteria, the new mortgage would be unlikely to meet the lenders of affordability criteria.
What actions are available to the lender under MCOB rules?
Select all that apply
-Agree to the favour advance but settle the credit card debt using the further advance
-Agree to the photo advance and take reasonable steps to ensure the credit card debt is repaid on completion of the mortgage
-use discretionary measures to alter the affordability assessment
-Agreed to the further advance but include the monthly Credit Card payments as committed expenditure in the affordability assessment
-Agreed to the further advance and warn the customer that he should pay off at least some of the credit card balances
-agreed to the further advance but settle the credit card debt using the further advance
-Agree to the further advance and take reasonable steps to ensure the credit card debt is repaid on completion of the mortgage
-agree to the further advance but include the monthly credit card payments as committed expenditure in the affordability assessment
Q11
A lender cannot treat someone’s application differently just because he’s not living in the UK true or false?
-false
A lender cannot discriminate on the grounds of race or nationality, but it can impose different terms on a borrower living outside UK or decide to not lend at all.
Because increased difficulty of pursuing borrower in event of default and repayments
Q4
Also traders must provide a detailed breakdown of their business expenditure on the tax return. true or false ?
False
All businesses must maintain accurate accounts but the detailed breakdown of expenditure is only required on a tax return if the businesses turnover is above VAT registration threshold
Q19
Joint income £2800
Committed expenditure £400
Basic essentials expenditure £800
Basic quality of life expenditure £600
Lender will consider a affordability based on 85% of disposable income.
By the fixed rate would cost £5.90 for each £1000 borrowed .
Max mortgage offer?
-144,067
-159,490
-169,490
£144,067
£1000 divided by £5.90 multiply £850 =
(850 = 85% of disposable income £1000)
